What Is the Dow Jones Industrial Average DJIA?

After closing above 2,000 in January 1987,44 the largest one-day percentage drop occurred on Black Monday, October 19, 1987, when the average fell 22.61%. Trading is typically carried out in an open outcry auction, or over an electronic network such as CME’s Globex platform. Many critics believe the S&P 500 is a better representation of the economy as it includes significantly more companies, 500 versus 30, which by nature is more diversified. Many critics of the Dow argue that it doesn’t significantly represent the state of the U.S. economy as it consists of only 30 large-cap U.S. companies. They believe the number is too small and neglects companies of different sizes. As you can see, the companies currently in the index are household names spanning a range of different business sectors.

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During the early 1900s, the Industrial Revolution spurred the creation of large industrial-type companies, many of which were located in the United States and were representative of the overall economy. But with technological advances and the advent of the world wide web, companies proliferated. The creation of, or the increase in, the number of economically meaningful industries with companies located anywhere in the world, has shaped a market that is almost completely interconnected and interdependent. Another reflects the fact that today, the stock market is much more geographically dispersed and fragmented by company size and industry. When the media reports daily changes in the stock market, they are often referring to the US 30. This index serves as a benchmark for the overall performance of the stock market.

• Read on to find out how the Dow works and what changes in the index means for investors and the stock market.
• Its movements are used as a proxy for the stock market’s overall performance.
• If the price of the current stock and the overall price of the index is known, then it’s straightforward to figure the individual weighting of a stock within the DJIA.
• Trading is typically carried out in an open outcry auction, or over an electronic network such as CME’s Globex platform.
• Individuals can invest in the Dow, which would mean gaining exposure to all of the companies listed in it, through exchange-traded funds (ETFs), such as the SPDR Dow Jones Industrial Average ETF (DIA).

Welcome to Investing.com’s comprehensive guide on the Dow Jones Industrial Average (also called “the Dow Jones”, Forex technical analysis “the Dow”, “US 30” and the “DJIA”), one of the most prominent U.S. stock market indices. This authoritative, comprehensive guide to the US 30 will shed light on the Dow Jones, its relationship with other indices, its historical background, and its impact on the economy. That makes it a hot topic of debate and, according to many pundits, a key barometer of the state of the overall stock market and economy. It’s been around since 1896 and comprises America’s finest, largest, and most invested in blue chip companies. The Dow 30 was developed to track the overall performance of the U.S. stock market when information flow was relatively limited.

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The focus was on the growth stocks of the time, mainly transportation companies. This means that the first Dow Jones Index included nine railroad stocks, a steamship line, and a communications company. The US 30, also known as the Dow 30, Dow Jones Industrial Average, or simply „the Dow,” is a prominent stock market index that includes 30 major publicly traded U.S. companies. This index tracks the performance of these key companies, chosen by a committee, across the New York Stock Exchange (NYSE) and NASDAQ, with transportation and utility companies excluded. The DJIA launched in 1896 with just 12 companies, primarily in the industrial sector.

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The Dow Jones is named after Charles Dow, who created the index in 1896 with his business partner, Edward Jones. Also referred to as the Dow 30, the index is considered a gauge of the broader U.S. economy. Both the Dow and the Nasdaq are stock market indexes that provide insight into the broader economy. While the Nasdaq is also a stock exchange, the Dow is purely a stock market index. The Dow does include stocks on both the NYSE as well as the Nasdaq while any Nasdaq indexes include only stocks listed on Nasdaq exchanges.

Both the US 30 and the S&P 500 a review of “financial modeling” are indexes tasked with tracking the performance of U.S. companies. When companies are removed and added to the index the membership list may temporarily show both the removed company and added company. For privacy and data protection related complaints please contact us at Please read our PRIVACY POLICY STATEMENT for more information on handling of personal data.

In contrast to most other major equity indices, the US 30 is price weighted, rather than market cap weighted, meaning that the higher an individual stock’s price, the greater the weight that it will have in the index. The Dow Jones Industrial Average (DJIA) is composed of 30 large, publicly traded companies that are considered to be representative of the U.S. stock market. These companies come from various sectors of the economy, including technology, healthcare, finance, retail, and more. In the Dow Jones, stocks with higher prices have a greater impact on the index’s movements.

The companies within the Dow employ a significant number of people and provide goods and services used by many Americans. The founders also created The Wall Street Journal.The US 30 was designed to provide a gauge of the oanda broker review overall U.S. stock market performance at a time when information was less accessible. The goal was to offer ordinary investors a clear indication of market trends and directions. The Dow is also a price-weighted index instead of being weighted by market capitalization. This means that stocks in the index with higher share prices have greater influence, even if they are smaller companies overall in terms of market value. This also means that stock splits can impact the index, while they would not for a market cap-weighted index.

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Many are technology firms, but you’ll also find healthcare startups, retail chains, and banks in the mix. By contrast, the Dow is an exclusive club of just 30 carefully selected corporate giants, mostly drawn from the New York Stock Exchange (NYSE), though it does include tech heavyweights like Apple and Microsoft Corporation (MSFT). You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. These figures below represent the average annual returns and percentage changes of the DJIA during each respective year.

Since then, it’s changed many times—the very first came three months after the 30-component index launched. The first large-scale change was in 1932 when eight stocks in the Dow were replaced. Understanding the Dow Jones Index can provide valuable insights and information for investors looking to navigate the dynamic world of stock market investing. Whether you are an experienced investor or just starting out, the Dow Jones Index serves as a reference point for monitoring market trends and making informed investment decisions.

This information is provided for informative purposes only and should not be construed to be investment advice. 81.8% of retail investor accounts lose money when trading CFDs with this provider. A Dow Jones Company (also called a US 30 Constituent) refers simply to any company which is currently part of the US 30 Index, such as those mentioned above at the time of writing this article. Here’s a table showcasing the historical average percentage returns of the Dow Jones Industrial Average (DJIA) for selected example periods.

Therefore, a higher-priced stock will have a larger weight in the index compared to a lower-priced stock, regardless of the market value of the company. This resulted from the aim to reflect the performance of these influential companies in the index’s movements. The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (/ˈdaʊ/), is a stock market index of 30 prominent companies listed on stock exchanges in the United States. Furthermore, critics believe that factoring only the price of a stock in the calculation, and not its market cap, does not accurately reflect a company’s performance.